2023 (2) TMI 51 - AT - Income Tax

Delayed deposit of Employees Contribution to ESI/PF - assessment u/s 143(3) - Delay in depositing the employees contribution and the contribution has been deposited beyond the date stipulated under the relevant Fund Act - As argued disallowance made by the CPC Bengaluru while processing the return u/s 143(1) of the Act is beyond the scope of provisions of section 143(1(a) of the Act and, therefore, cannot be sustained - HELD THAT - We have carefully perused the decision of the co-ordinate bench in the case of M/s P R Packaging Services 2022 (12) TMI 841 - ITAT MUMBAI as not given any independent finding but has simply relied upon another decision of Kalpesh Synthetics Pvt Ltd 2022 (5) TMI 461 - ITAT MUMBAI wherein the co-ordinate bench has based its decision on the interpretation and binding decision of the Hon'ble Jurisdictional High Court. In the case of Kalpesh Synthetics Pvt Ltd supra , the Tribunal has held that the CPC Bengaluru cannot override the binding decision of the Hon'ble Bombay High Court while making the impugned disallowance on account of delay in the deposit of employees contribution to PF/ESI. The co-ordinate bench has ignored the binding ratio decidendi of the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd 2022 (10) TMI 617 - SUPREME COURT Hon'ble Supreme Court has categorically held that the employees contribution deposited after respective due date cannot be allowed as deduction, and, therefore, it would be incorrect to say that the decision of the Hon'ble Supreme Court is applicable only in the case of an assessment farmed u/s 143(3) of the Act. In our considered view, the ratio decidendi is equally applicable for the intimation framed u/s 143(1) of the Act. Now coming to the challenge that the impugned adjustment is beyond the powers of the CPC Bengaluru u/s 143(1) of the Act is also not correct. In light of the aforementioned decision of the Hon'ble Supreme Court supra , as mentioned elsewhere, it cannot be stated that the impugned adjustment u/s 143(1) of the Act is beyond the powers of the CPC, Bengaluru. Power under sub-section (2) of section 143 of the Act leading to the passing of an order under subsection (3) thereof, is to be undertaken where it is considered necessary or expedient to ensure that the assessee has not understated income or has not computed excessive loss, or has not under paid the tax in any manner, If any narrow interpretation is given to the decisions of the Hon ble Supreme Court in the case of Checkmate Services Pvt Ltd supra , it would not only defeat the very purpose of the enactment of the provisions of section 143(1) of the Act but also defeat the very purpose of the Legislators and the decision of the Hon'ble Supreme Court would be made redundant because there would be discrimination and chaos, in as much as, those returns which are processed by the CPC would go free even if the employees contribution is deposited after the due date and in some cases the employer may not even deposit the employees contribution and those whose returns have been scrutinized and assessed u/s 143(3) of the Act would have to face the disallowance. We are of the considered view that the ratio decidendi of the Hon'ble Supreme Court is equally applicable to the intimation u/s 143(1) of the Act and, therefore, the decision of the co-ordinate bench relied upon by the assessee is distinguishable. Therefore, respectfully following the binding decision of the Hon'ble Supreme Court supra , all the three appeals of the assessee are dismissed and that of the revenue is allowed.

Summary

Issues Involved:
1. Additions/disallowances due to delayed deposit of Employees' Contribution to ESI/PF.
2. Scope of adjustments under section 143(1) of the Income Tax Act by CPC Bengaluru.
3. Applicability of the Supreme Court's decision in Checkmate Services Pvt Ltd to intimation under section 143(1).

Detailed Analysis:

Issue 1: Additions/Disallowances Due to Delayed Deposit of Employees' Contribution to ESI/PF
The common grievance in the appeals relates to the additions/disallowances made on account of delayed deposit of Employees' Contribution to ESI/PF. The undisputed fact is that there was a delay in depositing the employees' contribution, which was deposited beyond the date stipulated under the relevant Fund Act. The Supreme Court in Checkmate Services Pvt Ltd has settled this issue, stating that employees' contributions deposited after the respective due date cannot be allowed as a deduction.

Issue 2: Scope of Adjustments Under Section 143(1) by CPC Bengaluru
Another argument presented was that the disallowance made by the CPC Bengaluru while processing the return under section 143(1) is beyond the scope of provisions of section 143(1)(a). However, the Tribunal found that the co-ordinate bench in the case of Kalpesh Synthetics Pvt Ltd held that the CPC Bengaluru cannot override the binding decision of the jurisdictional High Court. The Tribunal, however, disagreed with this view, emphasizing that the Supreme Court's decision in Checkmate Services Pvt Ltd applies equally to intimation under section 143(1).

Issue 3: Applicability of the Supreme Court's Decision in Checkmate Services Pvt Ltd to Intimation Under Section 143(1)
The Tribunal noted that the Supreme Court's decision in Checkmate Services Pvt Ltd is binding and applicable to the intimation framed under section 143(1) of the Act. The Supreme Court categorically held that employees' contributions deposited after the due date specified in the relevant Act cannot be allowed as a deduction. Therefore, the Tribunal concluded that the decision of the Supreme Court is not limited to assessments framed under section 143(3) but is equally applicable to intimations under section 143(1).

Conclusion
The Tribunal dismissed the appeals of the assessees and allowed the appeal of the Revenue. It held that the disallowance of employees' contributions deposited after the due date is valid under section 143(1) of the Act, following the Supreme Court's binding decision in Checkmate Services Pvt Ltd. The Tribunal emphasized that any interpretation contrary to this would create discrimination among taxpayers and defeat the purpose of the legislative provisions and the Supreme Court's decision.